States Covet Tobacco Bounty for Education

Schools and students in a handful of states may receive an
unexpected boon from the $206 billion settlement that 46 states secured
last November with the nation's five largest tobacco companies.

Though states won't be able to tap their shares of the bounty until
June of next year, some lawmakers are considering passing legislation
this spring that would earmark the money for specific purposes. So far,
most proposals would use it to initiate or beef up smoking- and
health-related programs. But legislators in some states say part of the
money would be better spent on education.

In Colorado, for example, Gov. Bill Owens has proposed routing 40
percent of the state's estimated $2 billion payoff, or about $760
million over the settlement's 25-year repayment period, to no-interest
loans for school construction and repairs in needy districts and to new
reading programs for elementary students.

"This is an historic opportunity to take care of some of our more
glaring education problems," said Dick Wadhams, the Republican
governor's spokesman. "We think it's a sound plan."

Maryland, Michigan, and Oklahoma are a few of the other states
considering plans to put the tobacco money toward school programs.
Despite their proponents' good intentions, though, the proposals are
raising concerns in some states about the wisdom of shifting settlement
funding from health-related projects.

When Gov. Owens outlined his settlement-spending plan this month,
the first-term chief executive veered from a campaign pledge he signed
last October promising to direct any money the state received from the
settlement to public-health programs.

At the time he made the pledge, Mr. Owens thought states were
required to spend the settlement on such programs, Mr. Wadhams said.
Ultimately, however, the new Colorado governor decided it would be
"redundant" to spend the money on anti-smoking efforts he believed
would be taken up by the federal government.

Under Mr. Owens' package, in addition to the 40 percent for school
construction and reading, 20 percent of the settlement would be used to
provide health insurance for low-income children, and 30 percent would
be invested in a trust fund to pay for the education and insurance
programs even after the tobacco funds dry up. Ten percent would be left
for unspecified programs.

Colorado's health advocates say that while they like certain aspects
of the plan, they're disappointed that the proposal would allocate
nothing to smoking-prevention efforts. Because the state lawsuits that
resulted in the huge settlement were geared toward recouping some of
the past and future expenses of caring for those with smoking-related
illnesses, they contend that lawmakers ought to devote at least part of
the payoff to preventing others from picking up the habit.

"This is our opportunity to do things for tobacco and health care,"
said Michael Huttner, the director of government affairs for the
American Heart Association of Colorado, the group that sponsored the
pledge Mr. Owens signed last fall.

Mr. Huttner added that he would support a proposal that would pair
health and education interests by designating money for anti-tobacco
and other health programs in schools. "Instead of having us pitted
against each other, that would be a great way to work together," he
said.

Michigan Scholarships

Health groups in Michigan have similar complaints. There, Republican
Gov. John Engler has proposed using a substantial portion of the
state's estimated $8 billion share of the settlement to endow a trust
fund that would offer up to $3,000 in college-scholarship money to each
student scoring at top levels on the state assessments in reading,
writing, mathematics, and science. Students could use the scholarships
to attend any college in Michigan.

John Truscott, the governor's spokesman, said the state already
spends 6 percent of its tobacco tax, or roughly $35 million a year, on
the types of anti-smoking and health-related programs that other states
are hoping to start with the settlement money.

"We're farther ahead than most states" in providing
smoking-cessation programs, Mr. Truscott argued. "And education is our
top priority, so that's how we ended up with the proposal."

But Jim Moore, the director of programs for the state branch of the
American Lung Association, countered that Michigan ought to invest at
least $75 million in trying to stop a problem that he said costs it far
more every year.

"Our concern is that the merit-scholarship program not take all of
the [settlement] money," Mr. Moore said. If smoking-prevention efforts
fail to receive adequate funding, "in 25 years, we'll end up in the
same place," he added.

Settlement Uncertain

Even as state lawmakers, health advocates, and education proponents
dicker over how best to cut up the tobacco pie, they all agree on who
does not deserve a slice: the federal government.

President Clinton signaled in his State of the Union Address that he
intends to pursue tobacco-industry payments for the federal government
as well. Because smoking-related expenses run up Medicaid bills and the
federal government pays for at least half the Medicaid expenses in
every state, Mr. Clinton contends that the government is also entitled
to reimbursement. Exactly how the administration intends to pursue such
funding is unclear.

But Sen. Kay Bailey Hutchison, R-Texas, introduced legislation in
Congress this month that would block the federal government from taking
any portion of the money states obtain through the tobacco
settlement.

In Oklahoma, several legislators, along with Gov. Frank Keating,
have proposed using a large chunk of their estimated $2 billion share
of the settlement to rescue the state's underfunded teacher-retirement
fund. Even so, "it's hard to plan for something we don't have yet,"
said Rick Buchanan, a spokesman for the Republican governor.

Likewise, Democratic Gov. Parris N. Glendening has dubbed his
proposal for Maryland's estimated $4.4 billion share of the settlement
a "wish list" that would include money for class-size reduction, the
Head Start program, children's health initiatives, and
smoking-cessation programs.

Vol. 18, Issue 24, Pages 15, 19

Published in Print: February 24, 1999, as States Covet Tobacco Bounty for Education

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